US-Funded Projects in Limbo as Nepal Explores Alternatives

The future of numerous US-funded projects in Nepal remains uncertain after the US government suspended its financial support for 90 days. Key initiatives under the Millennium Challenge Corporation (MCC) and USAID have been halted, leaving critical infrastructure and development programs in limbo.

The MCC had planned to provide a 500 million grant, with the Nepalese government contributing 130 million, to support energy and road infrastructure development. The suspension has stalled the construction of 400 kV transmission lines and substations in Ratmate, Damauli, and Butwal, as well as upgrades to 100 kilometers of the East-West Highway. Additionally, plans for the Butwal-Gorakhpur cross-border transmission line and technical assistance for energy sector capacity building have been put on hold.

Similarly, USAID-funded projects in health, agriculture, education, and inclusive policies have also been affected. A $a$421 million agriculture initiative targeting food security for 69,000 households, and a $485 million education program focused on marginalized children have all been suspended. These projects, implemented in partnership with federal, provincial, and local governments, were expected to bring significant improvements to Nepal’s development landscape.

The suspension stems from an executive order by US President Donald Trump, which halted all foreign aid through the State Department and USAID for 90 days. This decision has left Nepal scrambling to find alternative funding sources.

Shyam Prasad Bhandari, Joint Secretary at the Ministry of Finance, stated that the government is currently in a “wait-and-see” mode. “The suspension of MCC and USAID programs was an immediate decision by the US President. We are waiting to see if there will be a review. If not, we will explore alternative funding sources or consider moving forward with some projects independently,” he told News Agency Nepal.

While the Ministry of Finance has not yet made any concrete decisions, internal discussions are underway to identify potential alternatives. Bhandari emphasized that the government remains committed to advancing these projects, either through donor support or domestic initiatives.

The suspension of US aid has raised concerns about the long-term impact on Nepal’s development goals, particularly in energy, infrastructure, and social sectors. As the government explores its options, the fate of these critical projects hangs in the balance.